'Lower Bitcoin Prices are More in Favor for Bad Actors and Ponzi Schemes’

Genesis Mining has grown quickly amidst a rapidly-expanding cloudmining market and is now the SHA and Scrypt mining industry leader.

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Genesis Mining has grown quickly amidst a rapidly-expanding cloudmining market and is now the SHA and Scrypt mining industry leader. The German-directed, Bermuda-registered corporation offers not only Bitcoin mining contracts but also diversifies its hashing power to “the most promising altcoins” such as Dogecoin and Litecoin.

In a follow up to our previous interview back in July of 2014 with the company, we decided to check up on Genesis Mining to see how the suppressed bitcoin price has impacted their operations, the current state of the cloudmining industry, and what is in store for the company in 2015. We caught up with founder Marco Streng to get the inside scoop.

Cointelegraph: Given the current climate where other cloudmining providers are shutting down their operations, how is the situation for Genesis Mining?

Marco Streng: Due to our efforts to get the best electricity rates possible for our distributed facilities by the time we started our operations, we are in the very favorable position to still keep our operation running while others have been forced to cease operations.

This is an important point because this gives our valued customers the ability to keep mining and take the reward other miners give away by turning off their machines. Our team is constantly seeking and discovering new ways to increase the efficiency of our mining operations in order to remain the most competitive player in the market.

“[W]e are still very flexible and can theoretically continue running the operation for bitcoin prices even below 100 USD/BTC.“

CT: Is there are a price range needed for Genesis to continue offering cloud mining?

MS: The situation is getting a lot tougher, no question. Although we are still very flexible and can theoretically continue running the operation for bitcoin prices even below 100 USD/BTC, I think the more important point is having the highest efficiency possible. Efficiency and electricity rates determine the competitiveness and will clear out the mining market.

By properly positioning our brand, we feel there is tremendous opportunity to remain a leader in this exciting industry and continue to serve our devoted customers. We remain committed to providing our customers with a solution to cater to the evolving market and will continue to innovate and do everything in our power to keep our customers satisfied.

- Genesis Mining Farm

CT: What can Genesis Mining do against problems created by lower value coins/difficulty increases?

MS: If difficulty is going up or the value of the Bitcoin is going down there is not much any mining provider can do and a decrease of profitability is the unfortunate consequence. However Bitcoin is not the only cryptocurrency and our proprietary system and technology gives our users the unique opportunity to also diversify the hashpower over other altcoins.

“As the market turns back into a bull market it will quickly become a huge rush on mining hardware again [...].“

Although there are currently some fears of the overall market due to the decrease in value, we are here for the long term and remain bullish on the future of cryptocurrencies. As the market turns back into a bull market it will quickly become a huge rush on mining hardware again since it would then be an opportunity to still acquire discounted Bitcoins while the price is increasing in value.

I can say with great confidence that people who already have the hashpower by that time enjoy a strong position while others desperately try to buy mostly sold out mining products. This isn’t the first time we’ve seen something like this occur in the industry and it likely won’t be the last. While others are stuck focusing on the short term, we positivity see things in the long term and are excited for what the future holds for our customers, Genesis Mining and the overall cryptocurrency ecosystem.

CT: Where are your miners located and how do you achieve maximum efficiency?

MS: Our locations are spread across the globe at places where electricity and infrastructure for large scale mining are the best possible. We have put a lot of effort in searching for the right places and are continuously increasing our global operation. There is currently a big competition for industrialized mining operations to find the electricity sweet spots on the planet, because the one who owns them will be strategically in the best position to get the highest profit out of mining.

CT: There are concerns that the cloud mining market suffers from a lack of transparency and operational risk from pricing the contracts efficiently. Has the volatiliy impacted your pricing?

MS: The prices for cloudmining are mainly based on prices for hardware components and electricity, both are independent of the price of Bitcoin. This gives users a unique opportunity especially if the Bitcoin price and mining prices are diverging. We all remember this very clearly by the end of 2013, where the price skyrocketed and everybody was trying desperately to buy sold out mining contracts or hardware.

“ [W]e are engaging a lot to protect the market from bad actors and want to build a validation system that helps especially newer and uneducated people to stay away from [scams].“

- CTO, Stefan Schindler in front of a big batch of miners in Iceland

CT: Do you think a lower bitcoin price increases the risk of mining centralization?

MS: It increases centralization, yes, because it is not possible for home miners to compete against large scale mining operations that use the economy of scale and optimized infrastructure to stay in the market while the rest have to drop out. The risk for centralization however is rather limited in my opinion, since we, as a cloudmining operation are distributing the mining power even more than by sending miners to the clients directly.

CT: How much would you say does it cost to produce a bitcoin in dollars?

MS: Regarding the price of the production of 1 BTC due to mining, it is very difficult to say. As you know mining depends on mainly 2 random variables, the difficulty and the bitcoin price. Since both of them are impossible to predict, doing a forecast on both simultaneously is even worse. The only thing I can say is that if you can reach the highest degree of efficiency due to best hardware and infrastructure, you can keep in the market while others have to drop out andtherefore gain the rewards that others leave by stopping to mine.

Also since mining costs are uncorrelated to the Bitcoin price and also currently at the lowest price ever, it will quickly become a big opportunity and a huge rush on mining as soon as the price goes up. Clearly, the ones who are already mining then will be better off than others who try to desperately buy sold out mining contracts or hardware.

“Unfortunately lower Bitcoin prices are more in favor for bad actors and ponzi schemes.“

CT: Do you think the lower price has some positive effects like weeding out the bad actors in the industry?

MS: Unfortunately lower Bitcoin prices are more in favor for bad actors and ponzi schemes since they are not really mining in the back and therefore don't have to cover any electricity and maintenance costs to run the machines. However, we are engaging a lot to protect the market from bad actors and want to build a validation system that helps especially newer and uneducated people to stay away from these. It is not only important for the affected customers, it is also important for the whole industry who would suffer from bad reputation that wrong business would bring to the market.

CT: Do you think we will see a mass shift to 20nm and 16nm FinFET nodes in 2015?

MS: An investment into 20 nm or pioneering even lower nanometer scales comes with very high costs and risk, but also with big opportunities. Although I know reaching the lowest possible scale is a big goal for all manufacturers, I only think very few companies will have enough capital to take the risk of such a large investment. You also have to consider the case that the chip that comes out later does not work and therefore, you lose a lot of money. I am confident though to see FinFET designs during 2015.

- Genesis Mining Farm

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